Overtime and TOIL in the UK: pay, limits and time off

What counts as overtime?

GOV.UK describes overtime as time worked beyond the normal hours fixed by the employment contract. The contract usually sets out any overtime rates and how they are worked out. Acas advises that the written statement of employment particulars should make clear which hours count as overtime and how they are paid.

In shift work, decide whether overtime is counted per day, per week or per rota period, and write it down.

Do you have to pay for overtime?

Not by law. GOV.UK is explicit that employers do not have to pay workers for overtime, and Acas confirms there is no automatic legal right to it. If the contract promises a rate, however, you must pay that rate.

Unpaid overtime and the minimum wage

The minimum wage is checked per pay reference period, which can be at most one calendar month. You divide the pay for the period by the hours worked in it; the average must not be below the relevant rate. The premium part of overtime pay – anything above the basic rate – does not count towards minimum wage pay.

Example: a kitchen porter is paid exactly the minimum wage for his contracted hours. If he works five extra unpaid hours in the month, his average hourly pay falls below the minimum and you owe a top-up. Unpaid overtime is often where minimum wage breaches start.

Can staff be required to work overtime?

Only if the contract requires it. Even then, staff usually cannot be made to work more than an average of 48 hours a week, normally calculated over 17 weeks. A worker can agree to work longer, but the opt-out must be voluntary and in writing, and nobody may be dismissed or treated unfairly for refusing.

Unless the contract guarantees overtime, you can stop people working it. But you must not discriminate between staff when you hand it out.

Time off in lieu (TOIL)

Some employers give time off instead of paying for extra hours. GOV.UK leaves the details of time off in lieu to agreement between you and the worker, so a clear written policy does the work. It should cover:

• Which hours earn TOIL – only overtime you approved in advance, or any time over the rota?
• Whether TOIL is hour for hour or at a higher rate.
• A ceiling on the balance and a deadline for taking it.
• Who approves when TOIL is taken.
• What happens to an unused balance when someone leaves.

TOIL does not pause the minimum wage check. For hourly-paid staff, the pay in each pay reference period still has to cover the hours worked in it at least at the minimum rate.

Part-time staff

Part-time workers must not be treated less favourably than full-time staff. According to GOV.UK, extra hours beyond their contract are usually paid at the normal hourly rate; an overtime rate usually applies only once they work more than full-time staff normally do and full-timers get extra pay for those hours. The contract can be more generous.

Overtime and holiday pay

If a worker has regularly received overtime in the previous year, Acas says it must be reflected in their holiday pay – for at least four of the 5.6 weeks for most employees, and for all 5.6 weeks for irregular-hours and part-year workers. You may include it in all 5.6 weeks for everyone, but you do not have to.

A worked example

Example: a hotel housekeeper is contracted for 30 hours. Over the summer she works 38 hours a week for eight weeks, then 30 hours for the remaining nine weeks of a 17-week reference period. That is 574 hours, an average of about 33.8 – well within 48. Her TOIL balance, though, has reached 64 hours.

If your policy caps TOIL at 40 hours, the balance is already over the limit. Agree dates for the excess now, or pay it out as the policy allows. And because those overtime weeks were regular, they belong in her holiday pay calculation too.

Common mistakes

• “Salaried staff do not need tracking.” Their unpaid hours can still breach the minimum wage or the 48-hour average.
• “TOIL can build up indefinitely.” Without a cap and a deadline, balances become a liability when people leave.
• “The opt-out covers everyone.” It must be signed by each worker individually – and they can cancel it.
• “Holiday pay is just basic pay.” Regular overtime has to be reflected.

Quick checklist

1. 1Put overtime rules and any TOIL scheme in writing.
2. 2Record actual hours, not the rota.
3. 3Check minimum wage averages every pay reference period.
4. 4Review 48-hour averages and keep signed opt-outs on file.
5. 5Include regular overtime in holiday pay.

Frequently asked questions

Does unpaid overtime count towards the 48 hours?

GOV.UK says paid overtime counts, and so does unpaid overtime you ask staff to do. Unpaid time a worker volunteers – staying late to finish something – does not.

Can I make someone cancel their opt-out?

No. You can ask a worker to opt out, but you cannot force them to sign, nor force them to cancel an opt-out they have made.